Month: October 2024

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Angela Rayner set to clampdown on Thatcher’s Right to Buy scheme

Angela-Rayner

Angela Rayner plans to reform Margaret Thatcher’s Right to Buy policy, which allows most council tenants to buy their council home at a discount, to ensure the stock of social housing is not depleted.

The deputy prime minister and housing secretary reportedly plans to slash Right to Buy discounts by two-thirds in an unprecedented attempt to stop council house tenants from buying their own homes.

Under plans to be unveiled in the Budget, the discount of 70% available to those seeking to buy their council house would be cut to about 25%.

At the same time, Rayner is to more than triple the amount of time people need to have lived in their home to qualify, from three years to 10.

Last year, 10,896 homes were sold through Right to Buy while only 3,447 were replaced, resulting in a net loss of 7,449. Since 1991, the scheme has resulted in the loss of 24,000 social homes, according to official figures.

Under Right to Buy, which was introduced in 1980 as one of Mrs Thatcher’s flagship reforms, the government sells off council housing at discounts of up to £102,400 to sitting tenants, rising to £136,400 in London.

Rayner acquired her council house using the Right to Buy scheme in 2007 with a 25% discount, making a reported £48,500 profit when selling it, albeit eight years later.

A Ministry of Housing, Communities and Local Government spokesperson recently said: “Right to Buy remains an important route for council housing tenants to be able to buy their own home but it’s scandalous that only a third of council homes sold under the scheme have been replaced since 2012.

“Increasing protections on newly-built social homes will be looked at as part of our wider review but there are no plans to abolish the Right to Buy scheme.”

Original Post: https://propertyindustryeye.com

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Housing Ombudsman highlights over 100 damp and mould cases

Housing Ombudsman highlights over 100 damp and mould cases

The Housing Ombudsman has released its latest ‘learning from severe maladministration’ report, focusing on inspections and timeliness within damp and mould complaints. 

With the important role that social housing has to play in giving safe and secure housing to millions, the Ombudsman says the learning in these reports should help landlords provide effective services that protect this aspiration.  

Throughout the report residents’ experienced distress and disruption from damp and mould as landlords responses were delayed, with residents losing the use of bedrooms or belongings, such as sofas, as mould spread, reporting ceilings near collapse and health impacts to them or their children, including asthma and eczema.   

The decisions are grouped together to show the organisational risk to the landlord as well as the impact on the resident because of a lack of timeliness around initial inspections, the commencement of works or their completion. Some of these cases concern all three of these delays which would need to be addressed under Awaab’s Law which is proposed for both social and private landlords. 

The Ombudsman says it is also important to stress that while this report focuses on findings about damp and mould, these cases often include a wide range of other property condition issues. 

The Ombudsman has also used this report to show where the redress being offered by landlords for significant and prolonged failings was repeatedly inadequate. For example, one landlord offered just £150 compensation to a family who lived within extensive mould for 5 years, including their bedrooms being uninhabitable, and another proposed £850 for failings in damp and mould for 4 years, despite the huge impact the issues had on a disabled resident.

The explanations of the compensation provided in these cases should assist landlords to make consistent payments that are clear, specific and proportionate and help to prevent cases being escalated. 

The landlords named in this report are: 

  • Bromford 
  • Clarion 
  • Croydon Council 
  • Curo Group 
  • Islington Council 
  • Kingston upon Thames Council 
  • Lewisham Council 
  • Barking and Dagenham Council 
  • Longhurst Group 
  • L&Q 
  • Metropolitan Thames Valley 
  • Moat Homes 
  • PA Housing 
  • Peabody 
  • Places for People 
  • Sanctuary 
  • Southwark Council 
  • Sovereign Network Homes 
  • Swindon Council 
  • Waltham Forest Council 

For the first time, the Ombudsman has also compiled an annex in this report due to the large number of severe maladministration decisions that relate to damp and mould. Download the report by clicking here. 

Richard Blakeway
Richard Blakeway

Richard Blakeway, Housing Ombudsman, said: “This is a topic that now dominates half of our casework and one coming into sharp focus given the government’s intention to introduce Awaab’s Law into both the social and private rented sectors.

“It is clear is that landlords are still struggling with timescales. This is despite policies often setting out a clear sequence of actions and existing obligations requiring reasonable resolution times.

“Throughout these cases landlord inspections are revealed as limited or repeated because of poor records before action is taken, with living conditions deteriorating during these delays. Often there can be a disconnect between the survey recommendations and the schedule of works as these repairs being delayed. Cases also include repairs being ‘completed’ but issues remaining for the resident and cases being closed without follow up inspections or communication with the resident.

“Together with the human impact, these delays can result in greater costs for the landlord, both in terms of repairs and avoidable redress. Landlords need to reevaluate approaches to compensation using these cases, to embed a fair and reasonable approach within local complaints procedures, which is an expectation of the statutory Complaint Handling Code. It is wholly unreasonable to offer just £150 to a resident who lost both their bedrooms to mould for more than a year, as happened in one case.

“Moreover, addressing the root causes of inadequate inspections and delays means resources can go into services rather than redressing service failings.

“We encourage landlords to engage positively with the lessons these cases provide and opportunities through our Centre for Learning. These are invaluable and will help you to provide an improved service for your residents.”

Original Post: https://propertyindustryeye.com

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Government urged to consider changes to NPPF or risk missing housebuilding target

Government urged to consider changes to NPPF or risk missing housebuilding target

Proposed reforms to the National Policy Planning Framework and other changes to the planning system in response to a Ministry of Housing, Communities and Local Government consultation on this issue has gained support from Propertymark. 

The professional body backs implementing changes to the planning system and is keen to see a system which represents the needs of residents and supports the building of necessary houses to keep pace with demand.  

Propertymark believes it is vital the ministry initiate changes which will assist the UK government with their aim of constructing near 2 million new homes during this parliamentary term.  

Lat month, Propertymark led a roundtable with members of their sales division to hear opinions about what is working with the planning system and what needs improving.  

Responses highlighted a lack of local knowledge and consistency among local council planning officers and stated that planning requirements should be tailored to each area. Properties, therefore, need to be built for the specific needs of local neighbourhoods, as one area may need more housing for older residents than others, for example.  

Members stressed that construction remains expensive, so councils would either have to build more affordable homes themselves or subsidise developers to meet precise demand.  

To make matters more difficult, members said that there is a lack of incentives for landowners to sell to develop.  

They also warned that without a long-term housing strategy from successive governments, there can be no way for politicians to ensure that there are housing options across all tenures to meet the needs of local communities on an individual basis.  

There was also strong feeling that new homes should also be built on brownfield sites first, be more energy efficient, and not compromise any natural landscapes. 

Commenting on members’ feedback, Rose Forman, policy and campaigns officer at Propertymark, said: “Focusing on planning reform is an important step for the UK government to deliver the magnitude of new homes it has promised. Propertymark consulted with our members who said there is a greater need for planning requirements to be more area specific, and for greater local knowledge and consistency in the decisions made by local authority planning officers. 

“Our members want to see homes built for the demographics who will need them and in the precise locations for which there is demand. The type and cost of construction must be taken into consideration and the UK Government must have a long-term strategy which future-proofs our towns, villages and cities for generations to come. New homes must be energy efficient and built around robust supporting infrastructure, such as upgrades to road and public transport setups, as well as wide ranging health and education provision.”  

See below: Knight Frank graph from recent Telegraph story questioning Labour’s 1.5m housing target shows 0% believe they will and 2% of respondents believed they will exceed the target.

Knight Frank graph from recent Telegraph story questioning Labour’s 1.5m housing target shows 0% believe they will and 2% of respondents believed they will exceed the target.

Original Post: https://propertyindustryeye.com

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Landlords ARE working people, and the Government needs to know that

Landlords ARE working people, and the Government needs to know that

Keir Starmer’s suggestion that landlords are not ‘working people’ is mistaken, says NRLA Chief Executive Ben Beadle. 

It’s depressingly familiar.

The tired rhetoric of the fat cat landlord living a life of luxury, paid for by their hardworking tenants.

We’ve heard it time and time again, but it was disappointing to hear it from our Prime Minister.

For those of you who have missed it, I will bring you up to speed.

In an interview this week Sir Keir Starmer told Sky News he would not consider someone who made income from property ‘a working person’.

Like you I was shocked. Like you I was incensed.

We just need to look at the Government’s own statistics to see why.

Official data shows that 30 per cent of landlords are employed full time, with a further 10 per cent working part-time; 28 per cent are self-employed in some way, while 35 per cent are retired and are likely to rely on their rental income for their pension.

It couldn’t be more categoric. We are working.

We are also not the ‘fat cats’ some elements of the media would have us believe, with almost 70% basic rate taxpayers. Read that figure again. 70%.

In my role as chief executive of the NRLA I travel the length and breadth of England and Wales, meeting our members and hearing your stories.

Our members come from all walks of life, but what unites you is a strong work ethic and a determination to do the right thing by your tenants.

Over my last four years at the helm, challenging stereotypes and preconceptions when it comes to landlords and the private rented sector has been one of my key objectives and slowly, slowly I felt we were turning the tide.

It is ill-thought through comments like this, that make me question that.

But since coming to power Labour has had much to say about the great work landlords are doing in providing vital homes to rent.

Indeed, Housing Secretary Angela Rayner, introducing the Renters’ Rights Bill, acknowledged the ‘important role of landlords, most of whom provide good-quality homes for their tenants’.

Being a landlord isn’t easy. It’s hard work.

Millions of families look to our sector for a home, satisfaction rates are high, and demand is growing.

Rather than stoking misconceptions, the Government needs to focus on the key challenge in the rental market, namely a lack of homes to rent to meet ever growing demand.

More information

  • If you are a landlord who wants to do it right, why not join us at our annual conference in Birmingham next month. The NRLA’s annual Landlord Conference, on November 6 will offer a unique opportunity for property professionals to here from experts from across the industry, including keynote speakers Andy Burnham and James Caan . Tickets for the event, which will be held at Birmingham’s NEC, are selling fast, so to find out more and book your place, click here.
  • In special recognition of our hard working landlords we’re offering £15 OFF membership. The offer can be redeemed this weekend only and is available to members and non members via our Refer a Friend scheme using promotion code WORKINGPEOPLE. If you successfully refer a friend during this period they will receive £15 off membership and you will get £15 off your next renewal.

Original Post: https://www.nrla.org.uk

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10 Tips for a Successful Rental Home Search in London

How Much Can I Borrow for a Home Loan 2

Finding a rental property in London can feel like a daunting task, especially if you’re new to the city or unfamiliar with the process. London’s vibrant rental market offers a variety of homes, ranging from modern apartments to traditional houses, all set against the backdrop of one of the world’s most dynamic cities. However, to secure the ideal rental property that suits both your budget and lifestyle, it’s essential to have a strategy in place.

In this guide, we’ll share essential tips to help you streamline your rental home search in London. Whether you’re a first-time renter or a seasoned tenant, these tips will help you navigate London’s rental market with confidence.

1. Start Your Search Early

The London rental market moves quickly, with desirable properties often being snapped up in a matter of days. Starting your rental home search early gives you more time to explore different neighbourhoods, compare prices, and arrange viewings. Aim to begin your search at least 6-8 weeks before your intended move-in date. This allows you to get a good sense of what’s available within your budget and avoid the pressure of making hasty decisions.

Ready to start your home search? Browse through Homesearch Properties today to explore current listings in London and book a viewing.

2. Determine Your Budget

Before diving into your search, it’s crucial to have a clear understanding of your budget. London is known for its high living costs, and rental prices vary significantly depending on the neighbourhood and type of property. Take into account not just the rent itself, but also other monthly expenses such as utility bills, council tax, internet, and transportation costs.

When setting your budget, consider setting aside at least 10% of your income for unexpected costs, like repairs or increases in rent. In general, it’s advised not to spend more than 30-40% of your monthly income on rent to ensure you have enough for other living expenses.

Need help finding a property within your budget? Use our advanced search filters on the Homesearch Properties  website to customise your search.

3. Choose the Right Neighbourhood

London is a vast city with a variety of neighbourhoods, each offering its own unique character, amenities, and pricing. Choosing the right area is just as important as choosing the right property. Consider factors like proximity to work, public transport links, schools (if you have children), and local amenities such as supermarkets, parks, and cafes.

Some popular areas for renting in London include:

  • East London: Trendy and increasingly popular with young professionals, areas like Shoreditch and Hackney offer a mix of vibrant nightlife, markets, and art galleries.
  • South London: Areas like Clapham and Brixton offer a diverse and lively atmosphere with great transport links into the city.
  • West London: Known for its more affluent vibe, neighbourhoods like Notting Hill and Kensington are ideal if you’re looking for picturesque streets and high-end boutiques.
  • North London: Camden and Islington offer a mixture of culture, nightlife, and excellent schools, making them popular with both young professionals and families.

Not sure which neighbourhood suits you best? Explore our detailed area guides on the Homesearch Properties London website to find the perfect location for your next rental home.

4. Know What to Look for During Viewings

When viewing properties, it’s important to keep an eye out for key details that could affect your living experience. While it’s easy to get caught up in the excitement of a new home, make sure to thoroughly inspect the following:

  • General Condition: Look for any signs of damp, mould, or structural issues. Check windows for drafts and make sure all appliances (such as ovens, fridges, and washing machines) are in working order.
  • Security: Check that all doors and windows have secure locks. If you’re viewing a flat, ask about the building’s security measures, such as a secure entry system or CCTV.
  • Heating and Water Systems: Make sure the heating system is in good condition and that there’s adequate insulation to keep the property warm during colder months. Additionally, check that the water pressure and heating work well, especially in older properties.
  • Noise Levels: London can be a busy city, so pay attention to noise levels both inside and outside the property. Ask the landlord or agent about any known noise issues, such as construction work or noisy neighbours.

Call to Action: Find your ideal rental home in London with peace of mind. Browse verified listings on Homesearch Properties  to schedule a viewing today.

5. Understand Your Legal Rights as a Tenant

Renting in London comes with certain legal protections. As a tenant, you have rights under the law, and it’s important to be aware of these when signing a tenancy agreement. Here are a few key points to keep in mind:

  • Tenancy Agreement: This contract outlines the terms of your rental, including rent amount, deposit, and length of tenancy. Make sure you read it carefully and understand all clauses before signing.
  • Deposit Protection: Your landlord is legally required to place your deposit in a government-backed tenancy deposit protection scheme. This ensures that your deposit is returned at the end of your tenancy, provided no damages or unpaid rent are due.
  • Repairs and Maintenance: Your landlord is responsible for maintaining the property in a habitable condition. If any essential repairs are needed (such as plumbing or electrical issues), it’s their responsibility to fix them.
  • Eviction Notice: Your landlord must give you proper notice if they wish to terminate your tenancy, typically two months for most assured shorthold tenancies.

Need more advice on renting? Visit our Homesearch Properties  blog for tenant resources and expert guidance.

6. Be Ready to Act Fast

As mentioned earlier, London’s rental market moves quickly. Once you find a property you like, it’s crucial to act fast. Have all necessary documents ready to submit to the landlord or letting agent, such as proof of income, references from previous landlords, and a copy of your passport or visa.

Some landlords or letting agencies may request a holding deposit to take the property off the market while your application is processed. This is typically equivalent to one week’s rent, and it’s refundable or deducted from your first month’s rent if your tenancy is finalised.

Get ahead of the competition! Register on Homesearch Properties London to receive instant alerts on new listings that match your preferences.

7. Use a Reputable Letting Agent

Navigating the London rental market can be overwhelming, especially if you’re unsure where to start. A reputable letting agent can simplify the process and provide you with access to properties that might not be listed on the open market. Agents also have experience dealing with landlords and can help you negotiate terms, making the rental process smoother for you.

When choosing a letting agent, ensure they are registered with a recognised professional body, such as ARLA Propertymark or the National Approved Letting Scheme (NALS). This provides peace of mind that the agent is adhering to high standards of professionalism.

Looking for trusted letting agents in London? Contact the team at Homesearch Properties today to get expert help with your rental home search.

8. Understand the Costs Involved

In addition to monthly rent, there are several upfront costs associated with renting a home in London that you need to budget for:

  • Holding Deposit: As mentioned earlier, this is usually equivalent to one week’s rent and is held while your tenancy agreement is being processed.
  • Security Deposit: This is usually capped at five weeks’ rent for most properties.
  • First Month’s Rent: Many landlords require the first month’s rent to be paid upfront.
  • Moving Costs: Factor in the costs of moving services, transportation, and any new furniture or appliances you might need.

Be sure to factor in these costs so you’re financially prepared to secure your new home.

Ready to take the next step? Explore available properties at Homesearch Properties and find your new rental home today.

9. Consider Short-Term vs Long-Term Tenancies

London’s rental market offers a range of tenancy options, and it’s worth considering what’s best for your situation. Short-term tenancies are great if you’re only staying in the city for a few months, whereas long-term tenancies offer more stability. Make sure the tenancy length works for you, and don’t be afraid to negotiate if you prefer a longer or shorter contract.

Whether you’re looking for a short-term or long-term rental, Homesearch Properties  has a range of flexible options to suit your needs.

10. Stay Organised

Finally, staying organised throughout the home search process is key. Keep track of properties you’ve viewed, the pros and cons of each, and any important deadlines for securing your new home. This will help you stay on top of your rental home search and ensure that you don’t miss out on your ideal property.

Simplify your rental home search in London with Homesearch Properties. Save your favourite listings, set up alerts, and get expert advice to make your next move stress-free.

Renting in London doesn’t have to be overwhelming. By following these tips and working with a trusted letting agent, you can make your rental home search as smooth as possible. Whether you’re looking for a modern flat in the heart of the city or a cosy home in a quiet suburb, your ideal property is out there waiting for you. Start your journey with Homesearch Properties and find the perfect home today.

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How Much Can I Borrow for a Home Loan?

How Much Can I Borrow for a Home Loan

When you’re considering purchasing a property, one of the first and most critical questions you’ll likely ask is, “How much can I borrow for a home loan?” Understanding this figure is crucial as it sets the boundaries for your property search, helping you to identify homes within your budget and avoid disappointment later in the process. Whether you’re a first-time buyer or looking to move up the property ladder, knowing your borrowing power is essential. This guide will help you navigate the complexities of mortgage borrowing, with a particular focus on the UK housing market, and how Homesearch Properties can assist you in your journey.

How Much Can I Borrow for a Home Loan 2

Understanding Mortgage Affordability

The amount you can borrow for a home loan is primarily determined by your financial situation. Lenders will assess your income, outgoings, and credit history to calculate how much they are willing to lend. This process is known as a mortgage affordability assessment.

1. Income Assessment

Your income is one of the most significant factors in determining how much you can borrow. Generally, lenders will lend a multiple of your annual income. In the UK, this typically ranges from 4 to 4.5 times your annual salary. For example, if you earn £50,000 per year, you might be able to borrow between £200,000 and £225,000. However, some lenders may offer higher multiples, especially if you have a strong credit history and low levels of debt.

If you’re purchasing a home with a partner, lenders will consider your combined income, potentially allowing you to borrow more. Homesearch Properties can help you find properties that fit within this budget, ensuring you’re looking at homes that are realistically affordable for you.

2. Outgoings and Debt

Lenders will also look at your outgoings and any existing debt. This includes other loans, credit card balances, car finance, and even childcare costs. The more debt and regular outgoings you have, the less you may be able to borrow. It’s essential to provide an accurate picture of your financial situation when applying for a mortgage, as this will impact the lender’s decision.

Reducing your debt before applying for a mortgage can increase your borrowing power. Paying off credit cards and personal loans, and minimising regular outgoings, can make a significant difference in how much a lender is willing to offer.

3. Credit History

Your credit history plays a vital role in how much you can borrow. Lenders will conduct a credit check to assess how well you have managed debt in the past. A good credit score can not only increase the amount you can borrow but also secure you a lower interest rate. Conversely, a poor credit history can limit your borrowing options and lead to higher interest rates.

If your credit history is less than perfect, it’s worth taking steps to improve it before applying for a mortgage. This might include ensuring you are on the electoral roll, paying down outstanding debts, and making sure you pay all your bills on time. Homesearch can advise on the steps to take to improve your credit score, helping you get the best possible mortgage deal.

4. Deposit Amount

The size of your deposit also impacts how much you can borrow. In the UK, the minimum deposit typically required is 5% of the property’s value. However, the more you can put down as a deposit, the better. A larger deposit reduces the loan-to-value (LTV) ratio, which is the amount of the loan compared to the value of the property. A lower LTV ratio is less risky for lenders, meaning they may offer you a better interest rate and, potentially, allow you to borrow more.

For example, if you’re looking at a property worth £300,000, a 10% deposit would be £30,000. The mortgage would then be for the remaining £270,000. The lower the LTV, the more options you will have when it comes to choosing a lender and securing favourable terms.

The Role of Interest Rates

Interest rates are another critical factor in determining how much you can borrow. Even a small difference in interest rates can have a significant impact on your monthly repayments and, consequently, how much a lender will allow you to borrow.

There are two main types of interest rates to consider: fixed and variable. A fixed-rate mortgage means your interest rate (and thus your monthly repayments) will stay the same for a set period, typically between 2 and 5 years. This can provide peace of mind as your repayments won’t change, even if interest rates rise.

A variable-rate mortgage, on the other hand, means your interest rate can go up or down. While you might benefit from lower rates initially, there’s a risk that rates could rise, increasing your monthly repayments. Lenders will consider these factors when assessing how much they are willing to lend, often being more cautious with variable-rate mortgages.

Homesearch can help you understand the different types of mortgages available and how they might affect your borrowing power. By comparing the market, Homesearch Properties can assist you in finding the best mortgage deal for your circumstances.

Mortgage Types and How They Affect Borrowing

There are several different types of mortgages available in the UK, each with its own advantages and disadvantages. The type of mortgage you choose can impact how much you can borrow and how much you will repay over the life of the loan.

1. Repayment Mortgages

A repayment mortgage is the most common type of home loan. With this type of mortgage, you make monthly payments that cover both the interest and a portion of the capital (the amount you borrowed). By the end of the mortgage term, usually 25 to 30 years, the entire loan will be repaid.

This type of mortgage is generally considered low-risk by lenders because the debt is being paid off gradually over time. As a result, lenders may be more willing to offer higher loan amounts.

2. Interest-Only Mortgages

With an interest-only mortgage, your monthly payments only cover the interest on the loan, not the capital. This means that at the end of the mortgage term, you will still owe the original amount you borrowed. Interest-only mortgages can make monthly repayments lower, which might seem attractive, but they carry significant risks.

Lenders are often more cautious with interest-only mortgages, and they may require you to have a solid plan in place for repaying the capital at the end of the term, such as investments or the sale of the property. Due to the higher risk, you may find that you can borrow less with an interest-only mortgage compared to a repayment mortgage.

3. Fixed-Rate Mortgages

As mentioned earlier, fixed-rate mortgages have an interest rate that stays the same for a set period. This predictability makes budgeting easier, as your monthly repayments won’t change, even if interest rates rise. Fixed-rate mortgages are popular among first-time buyers for this reason.

However, once the fixed-rate period ends, the mortgage will usually revert to the lender’s standard variable rate (SVR), which could be higher. It’s important to plan for this change when considering how much you can borrow.

4. Tracker Mortgages

Tracker mortgages are a type of variable-rate mortgage where the interest rate follows (or “tracks”) the Bank of England base rate plus a set percentage. If the base rate goes up, so do your monthly repayments, and if it goes down, your payments will decrease.

While tracker mortgages can offer lower rates initially, they come with the risk of rising payments if interest rates increase. Lenders may take this risk into account when deciding how much you can borrow.

Affordability Calculators and Mortgage in Principle

Before you start searching for homes, it’s a good idea to use an affordability calculator. These tools can give you a rough idea of how much you might be able to borrow based on your income, outgoings, and other factors. Many lenders and comparison sites offer free calculators that can help you get started.

In addition to using an affordability calculator, it’s also worth getting a Mortgage in Principle (MIP). An MIP is an indication from a lender of how much they might be willing to lend you, based on an initial assessment of your financial situation. While it’s not a guaranteed offer, having an MIP can make you a more attractive buyer to sellers, as it shows you are serious and have taken steps to secure financing.

Homesearch Properties can guide you through this process, helping you understand your borrowing power and ensuring you have the right tools to make informed decisions. With an MIP in hand, you can begin searching for homes with confidence, knowing what your budget allows.

Hidden Costs and How They Affect Borrowing

When calculating how much you can borrow, it’s essential to consider the hidden costs of buying a home. These costs can add up quickly and impact how much you have available for your mortgage deposit and monthly repayments.

1. Stamp Duty

Stamp Duty Land Tax (SDLT) is a significant expense when buying a property in the UK. The amount you pay depends on the value of the property and whether you’re a first-time buyer. Stamp duty can take a large chunk out of your budget, so it’s important to factor this into your calculations.

2. Legal Fees

You’ll need to hire a solicitor or conveyancer to handle the legal aspects of buying a property. Legal fees can vary, but they typically range from £500 to £1,500. These costs need to be factored into your overall budget.

3. Survey Costs

Before you buy a property, it’s wise to have a survey carried out to check for any structural issues. There are different types of surveys, ranging from basic valuations to full structural surveys, with costs ranging from a few hundred to over a thousand pounds.

4. Moving Costs

Don’t forget to budget for the cost of moving. This includes hiring a removal company, which can cost several hundred pounds, depending on the distance and the amount of belongings you have.

5. Home Insurance

Lenders will require you to have buildings insurance in place before they release the funds for your mortgage. Home insurance is another ongoing cost that needs to be included in your budget.

Homesearch can help you identify and plan for these hidden costs, ensuring that you have a realistic budget and don’t overstretch yourself financially.

How Homesearch Properties Can Help

When it comes to finding the right property, Homesearch Properties is your ideal partner. With extensive knowledge of the Homesearch London property market, Homesearch Properties can help you find homes that match your budget and borrowing capacity. By working closely with you, Homesearch Properties ensures that your property search is focused and effective, saving you time and helping you avoid homes that are out of your financial reach.

Moreover, HSP can connect you with trusted mortgage advisors who can guide you through the borrowing process, ensuring you secure the best possible mortgage deal. Whether you’re a first-time buyer or looking to upgrade to a larger home, Homesearch Properties is committed to making your home-buying journey as smooth and stress-free as possible.

Conclusion

Understanding how much you can borrow for a home loan is a critical step in your property search. By considering your income, outgoings, credit history, and deposit, and understanding the impact of interest rates and mortgage types, you can make informed decisions about your borrowing capacity.

With the right support from Homesearch Properties, you can navigate the complexities of the mortgage market, find homes within your budget, and move one step closer to securing your dream home. Whether you’re searching for homes in London or beyond, Homesearch is here to help you every step of the way.

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Capital gains tax speculation leads to ‘significant increase in market appraisal’

Rachel Reeves

There are growing that potential tax changes in the Autumn Budget next month may curb demand and increase downwards pressure on prices in higher-value markets

Rachel Reeves has not yet delivered her Budget but it is already having repercussions in the property market.

The government has said private schools will be charged VAT from January, but other announcements on 30 October may focus on capital gains tax (CGT), non doms, pension tax relief and inheritance tax.

By Tom Bill, head of UK residential research at Knight Frank, commented: “While there was a 34% increase in the number of sales in London in July and August compared to the five-year average, there was a 16% decline above £2 million, Knight Frank data shows.

“When you consider that £2 million-plus sales accounted for 22% of the £11.7 billion raised in stamp duty last year, it highlights the risk of tax rises having unintended consequences.

“The other way in which the Budget is impacting the property market relates to CGT and speculation that it may increase from its current level of 24%.

“Supply looks set to rise this autumn, which will be driven in part by owners attempting to sell before any changes are introduced.”

In an indication that more sellers are planning to list their property, the number of market valuation appraisals in August was 25% above the five-year average in London, Knight Frank data shows. Any future rise in supply would increase downwards pressure on prices.

“We are seeing a significant increase in market appraisals and listings from clients who have residential lettings portfolios,” said Andrew Groocock, chief operating officer of Knight Frank’s estate agency business.

“There is a feeling among many owners that they are better off bringing their properties to the market now and perhaps accepting a price that is 5%-10% lower, rather than running the risk of a CGT increase after the Budget.”

Average prices in prime central London (PCL) continued to edge down on a monthly basis in August. A fall of 0.2% took the annual change to -2.3%, which was the 16th month in a row the annual change was negative.

In fact, annual price growth in PCL has not been above 3% since March 2015 and prices remain 18% down on their last peak in August 2015.

Prices in prime outer London were flat in the 12 months to August as lower-value, needs-driven property markets perform more strongly. By comparison, prices in POL are 8% below their last peak in July 2016.

As far as lettings is concerned, rental value growth continued its return to earth in August as supply climbed and demand fell. Overall, rents rose 2.1% in prime central London (PCL) and 2.2% in prime outer London (POL).

In both cases, it was the lowest figure since the summer of 2021 when the long-let market was flooded with short-let properties during the pandemic. Supply subsequently fell sharply, in part thanks to landlords selling up during a stamp duty holiday, which meant rents were growing by more than 20% in the early months of 2022 as demand far exceeded supply.

The chart below shows how the market has rebalanced and put downwards pressure on rents.

The number of new listings in August was 8% below the five-year average, Rightmove data shows. That compares to much steeper declines in recent years.

Meanwhile, the number of new prospective tenants was 11% below the five-year average in August, partly due to a decline in overseas students applying to study in the UK.

The number of students accepted from China, which accounted for the largest proportion of overseas students in 2021/22, dropped 6% to 10,950 this year, according to UCAS data.

UK universities may have reached “peak China”, according to comments last year from the head of the Universities and Colleges Admissions Service, for reasons that include visa and tax changes as well as the fact rents have risen in recent years.

“International students coming to the UK are tending to focus on London more closely than other cities” said John Humphris, head of Relocation & Corporate services at Knight Frank. “With fluctuations in applications from China, but notable increases from Turkey and Canada, London remains an evergreen destination in spite of competition from other global education hubs, notably Australia”

Average rents in PCL are 34% higher than they were before the pandemic in February 2020, while the equivalent rise in POL is 29%.

While rents are normalising, there is a risk that upwards price pressure may intensify as more landlords sell due to possible legislative changes.

First, there is speculation that capital gains tax may increase from its current level of 24% in next month’s Budget.

In an indication that more sellers are planning to list their property ahead of possible changes, the number of market valuation appraisals for sale in August was 25% above the five-year average in London, Knight Frank data shows. Conversely, any future rise in supply would increase downwards pressure on prices.

“We are seeing a significant increase in market appraisals and listings from clients who have residential lettings portfolios,” said Andrew Groocock, Chief Operating Officer of Knight Frank’s estate agency business.

“There is a feeling among many owners that they are better off bringing their properties to the market now and perhaps accepting a price that is 5%-10% lower, rather than running the risk of a CGT increase after the Budget.”

Second, there is uncertainty over the revived Renter’s Reform Bill, as previously explored. Measures could include making it harder to evict tenants and tighter rules around the green credentials of lettings properties, according to recent press reports.

Original Post from https://propertyindustryeye.com

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How the Renters’ Rights Bill differs from the Renters (Reform) Bill

How the Renters’ Rights Bill differs from the Renters (Reform) Bill

Is the Renters’ Rights Bill much different from the Renters (Reform) Bill, on whose shoulders it stands?

In this blog post, I compare the new Renters’ Rights Bill and the Renters (Reform) Bill in a user-friendly side-by-side table to make it easy to see what is new, what has changed and what has gone. I then expand on the differences between the two Bills in the text, to explain what it means for landlords.

This analysis of the Renters’ Rights Bill is one of the first, if not the first, to be published. I’m happy for people to take inspiration from my analysis for their own content, provided they properly credit my efforts with a backlink 😊

At a glance: Renters’ Rights Bill versus Renters (Reform) Bill

Side-by-side comparison of Renters’ Rights Bill with Renters (Reform) Bill

Although the Renters’ Rights Bill is very similar to the Renters (Reform) Bill, there are some significant differences.

This table compares the key provisions side-by-side to show how the Renters’ Rights Bill compares and contrasts with the Renters (Reform) Bill to make it easier to spot the differences at a glance. I go into the detail in the rest of the blog post.

 

Key provisions Renters (Reform) Bill Renters’ Rights Bill
Abolition of Section 21 Yes Yes
Lord Chancellor’s assessment of county court eviction process before Section 21 abolished for existing tenancies Yes No
Abolition of fixed term tenancies Yes Yes
Minimum 6 month tenancy Yes No – tenant can terminate with 2 months’ notice at any time
Abolition of Assured Shorthold Tenancies, conversion to Assured Tenancies Yes Yes
Rent increase only by Section 13 notice Yes Yes
Change to power of First-tier Tribunal to determine new rent No Yes – FTT cannot increase rent higher than proposed rent
Right for tenant to request consent to keep pet Yes Yes – shorter timelines for response from landlord
No bans on children or benefit claimants Yes Yes
Requirement for advertising to state proposed rent No Yes – new provision
Ban on inciting / encouraging / accepting offer for higher rent No Yes – new provision
Remedying hazards (Awaab’s Law) No Yes – new provisions extend it to private rented sector
Landlord Redress Scheme (Ombudsman) Yes Yes
PRS Database (Property Portal) Yes Yes
New offences for Rent Repayment Orders Yes Yes – PLUS additional offences
Increase of Rent Repayment Order maximum from 12 to 24 months’ rent Yes Yes
Closing the “AST Trap” for long leases Yes Yes
Decent Homes Standard for PRS Yes Yes
Notice periods for Section 8 Reduced Increased
New Mandatory Ground 1A (sale of property) Yes – after 6 months Yes – after 1 year
New Mandatory Ground 4A for student accommodation Yes – tenants are full-time students Yes, but only for HMOs
New Mandatory Ground 8A for serious repeated rent arrears Yes No
Wider wording for Discretionary Ground 14 for anti-social behaviour Yes No

What’s new in Renters’ Rights Bill – not in Renters (Reform) Bill?

Whilst the Renters’ Rights Bill is largely similar to the Renters (Reform) Bill, the Renters’ Rights Bill has a number of provisions that were not in the Renters (Reform) Bill or which differ that Bill. Most were trailed in Labour’s 2024 King’s Speech and were proposed by Labour as amendments at the Report Stage of the Renters (Reform) Bill:

1. Ban on encouraging or inviting rental bidding, or accepting higher rent

It’s no surprise that the new Bill contains wording that prohibits “rental bidding”, ie inviting or encouraging applicants to offer to pay rent that’s higher than the amount in the listing.

However, the Bill goes a little further in that it also stops landlords from accepting an offer from an applicant to “pay an amount of rent under the proposed letting that exceeds the stated rent”.

This means that even if a tenant offers to pay more than the stated rent, without any encouragement, the landlord won’t be able to accept it.

The prevention of rental bidding was mentioned in the King’s Speech, and Matthew Pennycook tabled an amendment to this effect at the Report Stage of the Renters (Reform) Bill.

The Bill gives the local authority the power to impose a fine of up to £7,000 if they are satisfied “on the balance of probabilities” that the landlord or agent breached this obligation.

2. Requirement for advertising to state proposed rent

There is a new obligation for landlords and letting agents to state the proposed rent when advertising the property for let. This is needed for the ban on rental bidding.

That said, there’s no requirement to state the rent on a “To Let” board outside of a property.

3. Changes to the Section 13 rent process

As expected, the Bill changes the powers of the First-tier Tribunal under Section 14 of the Housing Act 1988.

As the Guidance explains: “Currently, tenants face the risk that the Tribunal may increase rent beyond what the landlord initially proposed – we will end this, so tenants never pay more than what the landlord asked for”.

This means that if a tenant challenges a rent increase in a Section 13 notice at the First-tier Tribunal, if the market rent is higher than the rent in the s13 notice, the tribunal will not be able to increase the rent to the market rent, as is the case now.

This was referred to in the King’s Speech, and Matthew Pennycook tabled an amendment to the Renters (Reform) Bill with a similar effect at the Report Stage.

There are a couple of new details in the Bill. As the Guidance explains, the Bill will “end the practice of backdating rent increases – with the new rent instead applying from the date of the Tribunal determination”.

Also, the First-tier Tribunal will be able to delay the implementation of the rent increase by up to two months: “in cases of undue hardship, we will give the Tribunal the power to defer rent increases by up to a further 2 months”.

This will undoubtedly increase the number of appeals to the First-tier Tribunal, as tenants will have nothing to lose, and the start date of the higher rent will be delayed.

Related Post: The new rules about rent in the Renters’ Rights Bill

4. Remedying hazards (Awaab’s Law)

Again, this addition comes as no surprise because it was specifically mentioned in the King’s Speech.

“Awaab’s Law” is an amendment to Section 10A of the Landlord and Tenant Act 1985 which was introduced by Section 42 Social Housing (Regulation) Act 2023 to require social housing providers to remedy hazards within a certain timeframe. The law was introduced after the death of Awaab Ishak in 2020 caused by the inhalation of mould in his parents’ social housing flat.

There is no detail in the Bill about how Awaab’s Law will be implemented for the private rented sector.

However, the Guidance states: “We recognise that there are differences between the private and social rented sectors. We will carefully consider how best to apply Awaab’s Law to the private rented sector in a way that is fair, proportionate and effective for both tenants and landlords, and will consult on this. We will set out further detail on our plans in due course”.

Related Post: Awaab’s Law and other new social housing laws

5. Additional offences for Rent Repayment Orders

The Bill adds the following extra offences to the list in Section 40 Housing and Planning Act 2016, for which the First-tier Tribunal can impose a Rent Repayment Order, over an above those in the Renters (Reform) Bill:

  • Knowingly or recklessly mis-using a possession ground
  • Breach of restriction on letting or marketing a property
  • Tenancy reform: continuing breaches

Related Post: The new Rent Repayment Order rules in the Renters’ Rights Bill

What’s missing from Renters’ Rights Bill that was in Renters (Reform) Bill?

The Labour government has omitted from the Renters’ Rights Bill the following four key provisions that were in the Renters (Reform) Bill:

1. No minimum 6 month tenancy

One of the amendments to the Renters (Reform) Bill at the Report Stage was that tenants needed to wait 4 months before serving 2 months’ notice to quit, instead of serving 2 months’ notice at any time. This effectively created a minimum tenancy period of 6 months.

Jacob Young explained the reason for this in the Report Stage debate of the Reform Bill: “The change ensures that landlords are able to recover the costs of replacing tenants and will prevent tenants from using PRS properties as short-term or holiday lets”.

In the same debate, Matthew Pennycook criticised the clause for the following reason: “the proposed six-month initial period will not only trap large numbers of tenants in unsafe and unsuitable properties, but put at risk the coherence of the tenancy regime that is at the heart of the Bill”.

The Renters’ Rights Bill does not create a minimum period and renters can serve a notice to quit straight away, even on day one of the tenancy. In the parts of the country where Airbnb is popular, this will create concern for landlords.

The Explanatory Notes to the Rights Bill (para 176) say that the “default period of notice required is not less than two months before the end of a period of the tenancy”. A landlord can agree to a shorter period, either in the tenancy agreement or in a separate document”.

It also calls into question the business model of letting agents that charge a large up front sum of, say, one month’s rent for a tenant find. I foresee that even more landlords will use online letting agents and bypass high street agents.

2. No new Mandatory Ground 8A for serious repeated rent arrears

The new Mandatory Ground 8A for serious rent arrears in the Renters (Reform) Bill is not in the Renters’ Rights Bill.

This is not surprising. Labour criticised this provision during the passage of the Renters (Reform) Bill through parliament. Matthew Pennycook said in Committee that the case for the new Ground 8A was “threadbare” and “could lead to a great many vulnerable tenants being evicted. It is a punitive and draconian measure that will cause great hardship”.

He added that it had been incorporated into the Bill “purely at the behest of those voices in the landlord lobby who have been forced to accept, but are by no means happy about, the wider reforms contained in this legislation [the Renters (Reform) Bill].”

3. No wider wording for Discretionary Ground 14 for anti-social behaviour

The Renters (Reform) Bill included a slight change to Ground 14 to include tenant behaviours that are “capable of causing” nuisance or annoyance. At present, landlords need to show that behaviour was “likely to cause” a nuisance or annoyance.

When the Renters (Reform) Bill was in Committee, Matthew Pennycook said of the change to Ground 14: “the range of behaviours that might be interpreted as falling within the definition of ‘capable of causing nuisance or annoyance’ is so expansive that even families with high-spirited children renting privately might fall foul of it”.

This change to Ground 14 is not in the Renters’ Rights Bill.

4. No Lord Chancellor’s assessment before implementation of s21 abolition

When the Renters (Reform) Bill was at the Report Stage, the then Junior Housing Minister, Jacob Young, introduced a new clause that required the Lord Chancellor to assess the operation of the county court possession order process and enforcement before the abolition of Section 21 would apply to existing tenancies.

The then government had introduced this clause after concerns from Conservative backbenchers that the country courts would not be ready for the influx of applications for orders for possession under Section 8.

Matthew Pennycook criticised the new clause when the Bill was debated at the Report Stage on the grounds there was no timescale, no metrics, no obligations and nothing to compel the government to take measures “to make the courts ready for the new system”.

He added that they had “heard extensive evidence in Committee about the fact that the system is essentially working fairly well and is recovering well from covid”.

Unsurprisingly, there is no Lord Chancellor’s assessment in the Renters’ Rights Bill.

The government press release states “the Bill will abolish Section 21 evictions for both new and existing tenancies at the same time, giving all private renters immediate security and assurance”.

Which provisions are different in the Renters’ Rights Bill?

Here are the provisions that were in the Renters (Reform) Bill, but the detail of which has been changed in the Renters’ Rights Bill.

1. Longer notice periods for landlords using Section 8 possession procedure

The Renters’ Rights Bill has longer notice periods than the Renters (Reform) Bill for some Section 8 grounds for possession.

Here are some examples of the longer notice periods:

  • Ground 1 (occupation by landlord or family): 4 months from date of service of notice, instead of 2 months, and it cannot take effect in the first 12 months of a tenancy instead of 6 months in the Renters (Reform) Bill.
  • Ground 1A (sale of property): 4 months from date of service of notice, instead of 2 months, and it cannot take effect in the first 12 months of a tenancy, instead of 6 months in the Renters (Reform) Bill.
  • Ground 4A (student HMOs for occupation by full-time students): 4 months from date of service of notice, instead of 2 months
  • Ground 6 (redevelopment by landlord): 4 months from date of service of notice, instead of 2 months

On the other hand, the notice period for Ground 8 (serious rent arrears) is unchanged, remaining at 4 weeks from date of service of notice.

2. New Mandatory Ground 1A cannot take effect until 12 months into tenancy, instead of 6 months

Landlords will be happy that the new Mandatory Ground 1A in the Renters (Reform) Bill (which allowed landlords to obtain possession where they intended to sell) is also in the Renters’ Rights Bill.

However, whereas the notice could take effect at the 6 month stage of a tenancy under the Renters (Reform) Bill, the relevant date when the notice expires will need to be at least 12 months into the tenancy. The 12 months will start from the beginning of the tenancy, even if that’s before Royal Assent of the Bill or when it comes into effect. In other words the clocks won’t restart when the new regime comes into force.

Landlords will need to give 4 months’ notice instead of the 2 months in the Renters (Reform) Bill, as mentioned above.

There are tough rules to make sure landlords genuinely do want to sell. They won’t be able to re-market or re-let the property for 12 months from the date the notice is served until the date the notice expires, or from the date they serve the particulars of claim if they serve a possession claim.

This has teeth as landlords may be fined up to £7,000 by the local authority if they break these rules.

3. New Mandatory Ground 4A restricted to students in HMOs

The original version of Mandatory Ground 4A (student accommodation for occupation by students) in the Renters (Reform) Bill was limited to HMOs. This restriction was lifted in the Report Stage so that it would apply to all full-time students, and not just those living in an HMO.

The Renters’ Rights Bill limits Ground 4A to full-time students in an HMO, as per the original draft of the Renters (Reform) Bill. In other words, if a full-time student rents a property by themselves or with another full-time student, the landlord won’t be able to use Ground 4A. Equally, if even one of the students in the HMO is part-time (for instance, doing a part-time Masters or PhD, which is very common), this new ground won’t be available.

4. Change to Mandatory Ground 8 (serious rent arrears)

The Bill changes Ground 8 so that the rent arrears need to be three months, up from two months, both at the time the notice is served and at the hearing. The notice is 4 weeks, an increase from the 2 weeks at present.

There had been some speculation that this would become a discretionary ground or subject to a hardship test, but this is not the case.

5. Longer notice period for Section 13 rent increase

At present, a landlord can increase rent using a Section 13 notice on Form 4, giving at least one month’s notice to start at the beginning of a new rent period.

The Renters’ Rights Bill increases the notice period from one month to two months, and it won’t come into effect until a determination by the First-tier Tribunal, if the tenant chooses to challenge the increase.

Related Post: The new rules about rent in the Renters’ Rights Bill

6. Shorter time limits for landlords to approve pets

Instead of allowing landlords the 42 days to consider requests for consent to keep pets that was in the Renters’ (Reform) Bill, the time limit has been reduced to 28 days in the Renters’ Rights Bill.

Is there a new “hardship” test for Section 8 mandatory grounds for possession in the Renters’ Rights Bill?

No. During August, the Daily Telegraph claimed that ministers were “considering bringing in French-style ‘hardship tests’ that would have to be carried out before landlords could evict tenants, effectively banning evictions in cases where renters were found to be worse off”. The Telegraph did not quote a government source in the article.

Whilst we do not know if ministers were considering hardship tests, they are not in the Renters’ Rights Bill.

This means that for Mandatory Grounds, the courts will continue to have no choice but order possession where landlords can prove they satisfy the requirements of the relevant ground.

Related Post: How to evict tenants and obtain possession under Section 8

Are there rent controls in the Renters’ Rights Bill?

No. Landlords are free to increase their rent to whatever level they believe is appropriate. However, they will need to use the process in Section 13, and the First-tier Tribunal will continue to have the power to reduce any proposed rent if it is above the open market value for a similar property in that area.

The Ministry of Housing, Communities and Local Government confirmed in a press release on 15 August that it had “no plans whatsoever to devolve rent control powers”.

When will the Renters’ Rights Bill come into effect?

Unlike the Renters (Reform) Bill, the Renters’ Rights Bill will abolish Section 21 in one go “as quickly as possible”, with a single date, and not with the two-tier system in the Renters (Reform) Bill. In other words, a “big bang” date where all tenancy agreements will move to the new system on the same day.

Matthew Pennycook told the BBC on 11 September they hoped the Bill would “make very quick progress through the House of Commons and that we have that new tenancy system in place within the first half or around summer next year.” In other words, the Renters’ Rights Bill is likely to come into effect by the summer of 2025 at the latest.

The Guidance states that on the implementation date, “the new tenancy system will apply to all private tenancies – existing tenancies will convert to the new system, and any new tenancies signed on or after this date will also be governed by the new rules. Existing fixed terms will be converted to periodic tenancies, and landlords will no longer be able to serve new section 21 or old-style section 8 notices to evict their tenants. This single date will prevent a confusing 2-tier system, and give all tenants security immediately”.

The Guidance adds there will ensure a “smooth transition and avoid unnecessary ‘cliff edges’, for example maintaining the validity of rent increases and notices served prior to implementation”.

Related Post: Renters’ Rights Bill: What happens when?

Final thoughts

Instead of rushing a short Bill through parliament that would abolish Section 21 “no fault” evictions, the government have used the Renters (Reform) Bill to create the Renters’ Rights Bill.

As the table above shows, the government have not just done a cut and paste job, but have made a number of changes to address some of the issues they raised when the Renters (Reform) Bill was going through the House of Commons, particularly those at the Report Stage. They have also simplified the implementation with a “big bang” date.

Renters will be disappointed there is not a hardship test for Section 8 evictions, there are no rent controls, and landlords will still be able to evict them if they wish to sell up.

Landlords will be disappointed there is no 6 month minimum tenancy period, no fixed term period for student landlords, no additional serious rent arrears ground for possession and no linking of the abolition of Section 21 for existing tenancies to court reform. They will also be disappointed that even fair increases will be delayed if the tenants challenge them at the First-tier Tribunal.

On the other hand, many of the provisions from the Renters (Reform) Bill that will benefit the wider PRS remain in the Bill. These include the PRS database, Landlord Ombudsman, extending the Decent Homes Standard to the private rented sector and widening the scope of rent repayment orders. Although, for most of these, we await the detail.

Finally, landlords will be pleased that Labour have retained the new Mandatory Ground 1A from the Renters (Reform) Bill. This “no fault eviction” will enable landlords to obtain an order for possession if they want to sell their property. Having to wait 12 months into the tenancy before the notice can expire, instead of the 6 months in the Renters (Reform) Bill, seems to me to be a fair compromise.

Original Post: https://theindependentlandlord.com

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How buy-to-let landlords selling up can recoup capital gains tax AND boost their pension in one move

Jumping ship? Some landlords may be looking to get out of the market as CGT hikes loom

With the Autumn Budget looming large in the minds of landlords, some have decided to sell up in order to avoid higher costs now and a possible capital gains tax raid in future.

The fear among buy-to-let owners is that Chancellor Rachel Reeves, will massively hike CGT in the Budget, as part of her bid to fill her claimed ‘£22billion black hole’ in the UK’s finances.

Currently, higher-rate taxpayer landlords would pay 24 per cent on gains they make on their properties, but this could increase to 40 per cent if the Chancellor decided to bring capital gains tax in line with the rate of income tax.

Regardless of a potential CGT raid, more buy-to-let landlords are already selling up. However, many will be left wondering how to save or invest the proceeds after the sale of their property is completed.

Paying into a pension could prove to be a lucrative move, as it could effectively recoup money lost to capital gains tax and boost their retirement pot.

Putting cash into their pension would fit with the investing strategy of many landlords, who use property investments as a nest egg for retirement.

Pension tax relief means landlords could claw back some money lost to capital gains tax. They can contribute as much as the £60,000 annual allowance this year to a pension and potentially more if they have previous years to carry forward.

Steven Cameron, pensions director at Aegon, said: ‘There’s widespread speculation that the Autumn Budget could bring increases to the rates of capital gains tax and possible changes to pensions taxation, such as the loss of higher or additional rate tax relief on personal contributions.

‘The threat of more penal rates of CGT is reported to be prompting many landlords to consider selling rental properties.

‘This is reshaping the longstanding debate between investing in property versus a pension, particularly relevant to those people who might regard second properties as their retirement saving.’

‘Those considering selling a rental property might consider investing the proceeds in a pension or stocks and shares Isa.’

Landlords are taking note of the speculation on capital gains tax but it is pressure elsewhere that is prompting many to sell.

Higher mortgage rates, less generous mortgage interest tax relief, greater regulation, the cost of energy efficiency improvements and other increased bills are encouraging more to cash in gains and move on.

There are other reasons landlords may be looking to sell, however.  These include higher mortgage rates and the Renters’ Rights Bill which will make it harder to evict tenants without a good reason.

Should you reinvest your cash into a pension?

As a buy-to-let owner, it’s unlikely that you could put your property on the market now and sell it before the Budget on 30 October.

But those that are already in the process may find themselves quids in before that date rolls around.

Capital gains tax is charged on annual profits on assets of more than £3,000. As it stands, landlords who are in the process of selling will face 24 per cent CGT if they are higher rate or additional rate taxpayers.

Basic rate taxpayers face capital gains tax at 18 per cent but gains are added to their other income to decide the rate – meaning they could be pushed into the higher rate bracket.

Landlords could consider paying the proceeds of their sale into a self-invested personal pension, known as a Sipp, as a way to claw back their CGT loss on the sale, and provide a boost to their pension in one fell swoop.

Pension contributions for most people automatically qualify for basic rate tax relief from the Government.

In order to take savers back to the position they were in before 20 per cent tax, contributions get a 25 per cent uplift – turning £80 paid in back into £100 pre-tax, for example.

Higher rate and additional rate taxpayers can claim the rest of their tax relief through self-assessment, delivering 40 per cent and 45 per cent tax relief on contributions.

The annual allowance – and need to be a high earner

There is a pension annual allowance that caps contributions eligible for tax relief at £60,000 per year, so for those making big profits it might take a number of years to contribute the funds from the property sale.

However, savers can carry forward unused allowances from up to three years previously, provided they were part of a registered pension scheme during those years. This would include a workplace pension scheme.

People can also only get tax relief on private pension contributions worth up to 100 per cent of their relevant annual earnings.

Neither rent or capital gain on a property will count as annual earnings for this, meaning that to pay the maximum into a pension, someone would generally need to earn £60,000 from employment or self-employment.

Those who have previously flexibly withdrawn money from a pension may have a lower £10,000 annual allowance.

Very high earners with adjusted incomes of more than £260,000 have their annual allowance tapered down.

Savers should also realise that withdrawals from their pension scheme will be taxed beyond the first 25 per cent, which is tax-free.

Cameron explained: ‘The pension annual allowance is currently £60,000, with the potential to carry forward unused allowances from the past three years.

‘In some circumstances, making a personal pension contribution, could also result in some or all of the capital gain from the rental property sale being taxed at the basic rate of CGT, 18 per cent, rather than the higher rate 24 per cent.

‘Paying into a pension means you can’t access your funds, currently until age 55 but rising to 57 in 2028. However, you could qualify at present for tax relief at your highest marginal income tax rate.’

According to data from the Institute for Fiscal Studies, between 30 and 40 per cent of private sector employees, equating to between 5 and 7million people, are on course to see their workplace pension fail to meet the requirements for a minimum standard of living.

Diverting your money into a pension also gives you access to a tax-friendly wrapper which will allow your investments to grow without facing further capital gains, dividend and income tax.

Landlords making big gains and considering paying into a pension would be wise to speak to a specialist tax or financial adviser, who can help explain their options and make sure things are done correctly.

 

What CGT changes could mean for property investors
Capital gain Current basic If aligned Impact Current higher If aligned Impact Current additional If aligned Impact
Gain 18% 20% 24% 40% 24% 45%
£10,000 £1,260 £1,400 £140 £1,680 £2,800 £1,120 £1,680 £3,150 £1,470
£20,000 £3,060 £3,400 £340 £4,080 £6,800 £2,720 £4,080 £7,650 £3,570
£30,000 £4,860 £5,400 £540 £6,480 £10,800 £4,320 £6,480 £12,150 £5,670
Source: Quilter 

What if capital gains tax is hiked in the Budget?

It looks highly likely that capital gains tax rates will be raised in the Budget.

It has been suggested that Rachel Reeves could equalise CGT with income tax and change the higher rate to 40 per cent, and the additional rate to 45 per cent. Basic rate taxpayers could see a lesser increase to 20 per cent.

Of course, if any Budget changes do come in, they might not be as extensive as landlords fear – and they might not come into force immediately.

Economists have warned against raising capital gains tax rates to as high as income tax rates without bringing in indexation, so that only gains above inflation are taxed.

If capital gains tax was raised to income tax levels and pension tax relief remained the same, landlords could potentially recoup their CGT by paying profits into a pension.

Landlords should also consider making use of their Isa allowance in order to benefit from another tax wrapper.

With an annual Isa limit of £20,000, this combined with paying £60,000 into a pension could allow themto place up to £80,000 of proceeds into tax-efficient accounts, without having carried forward any pension allowances.

Unlike pensions, Cameron said, ‘Isas offer tax-incentivised savings without locking your money away.

 

Selling out: Landlords purchased just 10% of all homes sold during the first half of this year, the lowest share seen since 2010 according to the estate agent Hamptons
Selling out: Landlords purchased just 10% of all homes sold during the first half of this year, the lowest share seen since 2010 according to the estate agent Hamptons

 

How many landlords are selling up?

Figures from Rightmove show that 18 per cent of homes currently up for sale were previously available to rent. This compares with just eight per cent in 2010.

In London, this figure rises to almost a third of homes having previously been available to rent. In the North East and Scotland, 19 per cent were previously rented.

Meanwhile, data from Hamptons reveals that the number of homes being bought by landlords has dropped to a 14-year low.

Original Post from https://www.thisismoney.co.uk

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Rates cut on wide range of buy to let and holiday let mortgages

Rates cut on wide range of buy to let and holiday let mortgages

Suffolk Building Society is taking up to 30bps off its fixed Buy to Let, Buy to Let Light Refurbishment, Expat Buy To Let and Holiday Let products.

It is also slicing up to 30 bps off its 95% resi mortgages, giving an affordability boost to first time buyers and those with smaller deposits.

A society spokesperson says: “We’re pleased to be able to offer landlords more affordable rates across various Buy To Let product types to help lower their monthly costs. And of course, lower payrates help with BTL affordability, enabling them to access the loan amounts they require.

“As well as new regulations around energy efficiency and the introduction of a new Decent Homes Standard requiring improvements, landlords are also facing further changes from the upcoming Renters’ Rights Bill. In addition, the Budget may bring further change. As a result, landlords face uncertainty so saving money where possible is always a positive.”

She adds: “With house prices still rising, and the average UK house price standing at £289,723, there’s a clear need to support first time buyers with their property ownership ambitions. First time buyers are in the spotlight at the moment and rightly so.

“With the cost of living and the ability to save up a sizeable deposit becoming even more challenging, higher LTV products go some way to help those looking to get on the property ladder. It also provides an alternative for those looking to remortgage and borrow extra for home improvements too.

The following are now available for both purchase and remortgage:

Buy to Let

  • 80% LTV 2 Year Fixed capital and interest has been reduced by 20bps to 5.39%, max loan £1m.
  • 80% LTV 5 Year Fixed capital and interest has been reduced by 30bps to 5.19%, max loan £1m.

Buy to Let Light Refurbishment

  • 80% 2 Year Fixed capital and interest has been reduced by 20bps to 5.49%, max loan £1m.
  • 80% 5 Year Fixed capital and interest has been reduced by 30bps to 5.29%, max loan £1m.

Expat Buy to Let

  • 80% 2 Year Fixed capital and interest has been reduced by 16bps to 5.69%, max loan £1m.

Holiday Let

  • 80% 2 Year Fixed capital and interest has been reduced by 14bps to 5.55%, max loan £1m.

Residential

  • 95% LTV 2 Year Fixed capital and interest has been reduced by 30bps to 5.39%, max loan £500,000
  • 95% LTV 5 Year Fixed capital and interest has been reduced by 24bps to 5.05%, max loan £500,000

Original Post from https://www.landlordtoday.co.uk